CYPRUS: Energy map changing over next three years

10 February, 2019

By Kyriacos Kiliaris

The Cyprus energy sector is to see major changes over the next three years when the electricity market is expected to finally open and with new producers waiting on the sidelines, adding to the present solar parks and wind farms.

With the first step towards a free electricity production and distribution market taking place with the separation of the Cyprus Transmission Operator from the Electricity Authority of Cyprus (EAC) earlier this year, government plans hoped to see the complete opening up of the market the same year.

The TSO is tasked to facilitate and monitor the newcomers in the field both with regards to producing and distributing electricity from conventional and alternative sources of energy.

While Cyprus is on the brink of missing its EU 2020 targets which should see 10% of local energy needs produced from renewable energy sources (RES), the country is ready to welcome a number of significant alternative energy power producers.

To facilitate this, Cyprus has approved a draft 2021-2030 National Plan for Energy and Climate which includes various policies and measures to combat climate change and improve energy supply.

The plan sets a national goal for a 24% reduction in greenhouse emissions by 2030, compared to 2005 levels (excluding emissions from electricity, cement and brickworks), when the EU target is 40% for the entire bloc.

A significant component of the government’s plans is the opening up of the electricity market which Anthi Charalambous, Head of Energy and Environment Service at the Employers and Industrialists Federation (OEV), considers to be essential for Cyprus to meet its 2030 targets.

“The market needs to open up to facilitate all the new players coming into the energy field, especially those involved in electricity distribution,” said Charalambous.

The head of OEV’s Energy Service said that there are a number of projects in the pipeline for the production of energy from alternative sources. She told the Financial Mirror that a number of solar energy projects which will add some 90 MW to Cyprus’ grid, have been approved by the Energy Ministry.

“These are the first projects have been approved by the authorities in the framework of the state’s energy policy, the phase 1 if you will, with a further 100MW to come online with projects which will be approved in phase 2,” said Charalambous, adding that a major wind farm with a capacity of 50 MW is also in the pipeline.

She said that a total of 320 MW RES projects were submitted to the authorities, with one third of them been rejected due to technical issues, such as the distance from the grid portals.

Charalambous said that while some 200 MW produced by RES are to be added to the island’s energy capacity, the energy landscape will also significantly change with the addition of energy produced by power plants running on natural gas.

“One such project is to come online in 2021, with the company behind the project expecting that works regarding the arrival of natural gas to the island will be completed by then. However, the combined-cycle power plant will have to run on conventional (diesel) fuel until 2023, which is a more realistic date for the arrival of natural gas,” commented Charalambous.

She said that the power plant to be built by Power Energy Cyprus (PEC), a special purpose vehicle (SPV) set up by the Cyfield Group of developers and contractors, is to add some 260 MW to the capacity of the country’s grid.

Charalambous added that if natural gas does not arrive by 2023, then Cyprus can essentially wave goodbye to hopes of achieving its EU 2030 targets regarding the reduction in carbon emissions, and stressed that all alternative energy projects depend on the opening up of the market.

She explained that all these projects are hanging from a thread as problems arising from a failed tender procedure for an IT system which was to monitor and regulate the electricity market, are delaying the opening up of the market.

“The software will essentially be the platform through which the distribution of electricity will be organised and monitored,” said Charalambous.

Charalambous told the Financial Mirror that the tender procedure fell through when the TSO’s call for tenders attracted only one company that had asked for three times the amount stated in the tender documents. This being the case, the procedure was annulled and another call for tenders will be issued.

“This means another delay of at least 18 months. That is without taking into consideration the time needed for training the operators of the system,” said Charalambous.

A number of licensed distributors are ready to go live, such as Energy First, Bioland, CYPV and Cyfield’s Enerfield.

Natural gas to radically bring down prices

PEC, one of the newcomers to the energy scene which will radically change the market of electricity production and supply, promises to deliver cheaper and cleaner energy to households and businesses.

Power Energy Cyprus (PEC) Ltd., plans to produce about a quarter of the island’s present capacity, more than what renewable sources (solar parks and wind farms) already contribute into the energy mix.

The first private conventional thermal power plant is to be ready in 2021 with owners PEC, part of the Cyfield Group, aiming to become the first privateer to dynamically enter the energy sector, offering an alternative to consumers and breaking into the monopoly of the Electric Authority of Cyprus.

Cyfield is already leaving its mark in the construction market, having survived the economic crisis of the past decade, with some major infrastructure projects, tower developments such as the landmark 360 high-rise in Nicosia and the Arc-Ship tower in Limassol, projects in Greece and Egypt, and the Ayios Ioanis photovoltaic park, near Nicosia, producing about 3MW of solar energy since 2016.

Talking to the Financial Mirror, George Chrysochos, PEC’s CEO, said that the company’s aim is to be an attractive alternative to EAC as they will be in a position to provide cheaper energy to consumers.

“We aim to complete works on the power plant by 2021. We deliberately planned the completion of works on that date so as to coincide with the arrival of natural gas in Cyprus,” said Chrysochos.

Explaining that the power plant will be equipped with the state-of-the-art combined cycle electricity production units, Chrysochos said that the project, acquired by Cyfield from its previous Russian owners in 2018, will produce electricity primarily using natural gas and if necessary, with liquid fuel.

“Considering that on the one hand natural gas is cheaper and on the other hand our state-of-the-art equipment will secure minimum losses as our production units will be more efficient than those of the EAC, then we can say with certainty that we will be offering consumers cheaper electricity,” said PEC’s CEO.

Chrysochos added that while more efficient methods of production mean cleaner energy, the power plant will also install emission filters which will capture pollutants which otherwise would be released into the atmosphere.

The power plant to be built in the area of the Vassiliko energy hub will have the capacity to produce 260 megawatts (MW) of electricity, which corresponds to about a quarter of energy being produced today in Cyprus, as the country has an average capacity of 1100 MW.

As explained by Chrysochos, the project is to cost some EUR 200 mln, which is to be covered entirely by PEC funds and financing.